Taxpayers Claim Electric Car Credits for Gas Guzzlers

During the first half of 2010, nearly 13,000 U.S. taxpayers wrongly claimed a staggering $33 million for the electric car tax credit incentive, a Treasury Department inspector general report said.

The credits, designed to encourage the uptake of plug-in hybrid and electric-only vehicles under the American Clean Energy and Security Act of 2009, rewards taxpayers who purchased a qualifying vehicle during the year with a $7,500 federal tax rebate check.

Among the claimants filing for the $7,500 credit were owners trying to claim the tax credit for the purchase of some of the most hungry gas-guzzlers on the road: A Hummer H3, a Dodge Durango and a Cadillac Escalade.

Many people claiming the $7,500 credit for the purchase of a golf cart will be disappointed too, since they fail to meet the requirements outlined in the ACES Act as being eligible for the grant.

Erroneous claim or malicious fraud? Among those who filed were 29 prisoners, claiming a total of $49,926 in vehicle credits -- more than enough to buy a 2011 Nissan LEAF and 2011 Brammo Empulse electric motorbike outright.

More shockingly, the inspector general's report mentions that IRS employees had even claimed purchases of electric cars they had not made. They are now under investigation by internal departments within the Treasury, although no details have been released to the press.

In an attempt to prevent such a large number of erroneous claims to be filed, the IRS is planning a revamp of its manuals and software systems to reduce the number of genuine erroneous claims made by owners of non plug-in hybrids such as the 2011 Toyota Prius.

Regardless of innocent confusion or malicious fraud, the IRS will be contacting everyone who filed an incorrect claim in the near future.

The IRS said in a statement that it was taking “aggressive steps to recapture the credits people erroneously claimed.”

Those who are buying an bona fide electric vehicle need not worry of being accused of foul play, however. Legimate claimants are still entitled to up to $7,500 of federal tax credits during 2010 and 2011 for the purchase of cars like the 2011 Chevrolet Volt, 2011 Tesla Roadster and 2011 Nissan LEAF.

Those wishing to have their hybrid cars converted to a plug-in hybrid using one of the many conversion kits or companies now available have until the end of 2011 to convert their car for up to $4,000 in federal tax credits.